A boom in the rental market and an oversupply of condos has renters in a good position for now, but an industry executive says the reasonably favorable conditions “won’t last” and that a supply shortage looms at the end of the decade.
“I would say to any renter: Take advantage of this market because it’s not going to last,” said Shaun Hildebrand, president of Urbanation Inc., which tracks rental data in the Greater Toronto and Hamilton Area (GTHA). “It is rare for rents in Toronto to decline for an extended period of time.
He said this has only happened a few times in the last 20 to 30 years, including during the COVID-19 crisis, and it is happening now as a huge supply of rental housing becomes available.
According to Urbanation, rental starts in the GTHA rose 42 percent in 2025 compared to the previous year, reaching an annual high last seen in the 1970s, while the number of rental buildings under construction increased 77 percent compared to five years ago. Meanwhile, 6,379 rental units were completed in 2025, a 40-year high.
All of the supply has led to higher vacancy rates, and rents have fallen by around 10 percent from the market peak in the third quarter of 2023. Prices are still high, with average rents approaching $3,000 for 720 square feet of space, up 16 percent from five years ago.
To attract tenants, landlords are increasing their incentive offers, Hildebrand said.
“Pretty much every building that’s been completed in the last few years is offering incentives, and in fact most of them are currently offering two months’ rent for free, so that’s a pretty big discount compared to a 12-month lease,” he said.
Landlords also offer gift cards, cash moving bonuses, free internet, and discounted rates on parking and locker rentals, or promise not to raise rents for a certain period of time.
Incentives work to some extent, but “there are a lot of cheaper condo rentals out there right now that they have to compete with,” Hildebrand said.
Condominiums are typically cheaper to rent than purpose-built apartments because they are often owned by individual investors who have a mortgage and have more flexibility with rent.
With an oversupply of condos on the market, renters have had more options lately.
According to Urbanation, between 2024 and 2025 there will be a trend for tenants to move from a condominium to a cheaper one.
“There has been a significant shift in the market toward lower-priced units,” Hildebrand said, as “the volume of rental transactions more than tripled for units renting less than $2,000 per month and more than doubled for units renting between $2,000 and $2,200 per month.”
But he said the momentum currently benefiting renters is time-sensitive.
Urbanation predicts that virtually no condos will be built in the GTHA by 2029, representing a significant crisis for the rental market as condos account for nearly 80 percent of rents.
“That’s going to leave a pretty big supply gap in the market,” Hildebrand said.
This is where the functional building rental sector is at its peak.
Many rental projects that began construction in 2025 are expected to come online in a few years, with several projects part of multi-phase plans in affordable locations on the edge of the downtown core and near transportation hubs.
“(Developers) are looking at this as an opportunity to enter an underserved market in a few years,” Hildebrand said, adding that despite 10,000 new rental units opening in 2025, there won’t be enough supply to satisfy a market like the GTHA, where the condo supply will have dried up.
He estimates an additional 20,000 to 30,000 units will be needed to prepare the market for purpose-built rental housing
for the coming supply bottleneck.
“This is exactly the right time to encourage more rentals as this will help maintain supply,” he said. “If we want to sustainably improve affordability, we need more consistent supply and it doesn’t look like that’s going to happen given what we expect in terms of supplies in the coming years.”
• Email: gmvsuhanic@postmedia.com